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TRANSCRIPT:

Burke Alder:

Welcome to Lendio Whiteboard. This whiteboard series is dedicated to making small business loan simple.

Today, we’re going to be talking about the Four Pillars of setting your business up for success and getting a small business loan. We’re going to talk about Credit Scores, Time In Business, and Monthly Revenue. What is your monthly revenue have to look like to really get set up to getting a small business loan? And then we’re going to discuss some of the collateral types you can use to really secure some financing for your business.

But, let’s get into credit score. Here we go. So a really good credit score that a lender would be looking for will be around 720. I would say that’s where you’re going to be shooting for as a small business, you really should get that 720 credit score. This is going to prove to them that you have a track record of paying back, whether it’d be another loan or a credit card. So, 720 is kind of the scale that we use to really determine credit score. Now let’s move over to time in business.

Now, there might be some start-ups watching this or some established businesses. The magic sweet spot to get you a loan is really 6 months in business. But we’re really going to be trying to drive toward more time in business. The more you’ve been in business, the better your credit score, the better your rate, your interest rate on your loan.

Now, let’s move over to monthly revenue. This is interesting but there is kind of a minimum. We’re looking at about eight thousand a month, which turns in to about a hundred thousand a year. But that minimum requirement is important because it shows that you have established your business, you’re having success.

So you combine your credit score, you combine your time in business and you combine your monthly revenue; you’re really setting yourself up tohave success. Once again, the better you can do at moving your monthly revenue up, the better you’re going to be setting yourself up to get a loan. Now depending on those three areas, we’re going to move over to collateral.

Things like your monthly deposits in your bank account; merchant transactions through a credit card transaction can be collateral; home equity, a line of credit through your home; real estate, you may have equipment, even a 401K. These are all collateral types you can use.

So let’s walk through a scenario. Let’s say, I don’t have 720 credit. “Hey, I’m a business owner and I take risks, and my credit is not as good.” So let’s say we’re somewhere in between 500 and 600. Inside of 500 and 600, I’m really going to have to rely on these other three pillars; time in business, monthly revenue and collateral. So let’s say, you know, I’m just – have poor credit but I’m about a year in business. With poor credit and a year in business, it’s really going to come over here to another way that I can use collateral for my business which is using monthly revenues through deposits and merchant transactions. So through those areas, even though I have low credit score, I haven’t been very long in business, and let’s say I have ten thousand a month in credit card transactions or revenue. I’m going to use that as collateral to get a loan. That’s just an example of someone who may be out there right now.

How’s your credit score? How’s your time in business? How’s your monthly revenue and collateral? Those are four pillars. As you’re looking at “Hey, I wonder if I can get a business loan?” Best world, 720, 6 months in business minimum, monthly revenue of 8K or better, and then be able to use some of those collateral types.

This has been fun. Excited? Just stop by for another Whiteboard Wednesday. We’ll see you next week.

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About the author

Burke Alder

Burke is passionate about strengthening America through small business and entrepreneurial growth. He has spent over 20 years in the pursuit of learning, developing, and executing principles and strategies that drive high-performance and explosive business growth. Burke writes about business financing, leadership, marketing, teamwork, and productivity. You can follow Burke on twitter here.

California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through Lendio Partners, LLC, a wholly-owned subsidiary of Lendio, Inc. and a licensed finance lender/broker, California Financing Law License No. 60DBO-44694.